Oil and Gas News

WoodMac forecasts Australian LNG investment boom

At least $14.8 billion worth of gas projects are on track for final investment decisions next year, according to Wood Mackenzie’s (WoodMac) Australasian upstream 2021 outlook.

With liquefied natural gas (LNG) backfill as the focus, there are three upstream FIDs pending, including Mitsui’s Waitsia project, Santos’ Barossa project and Woodside’s Scarborough project, as well as the AIE Port Kembla LNG import terminal, which would supply the east coast market.

WoodMac senior analyst Daniel Toleman said after doing everything possible to tighten belts this year, Australian operators would have to start spending.

“The backlog of FIDs will begin to clear as a fresh round of projects are sanctioned. But for this to occur, there has to be continuing improvement in the macro-environment and prices trending up,” Toleman said.

“The first cab off the rank is expected to be Waitsia, located in the Perth Basin. The project will export LNG from the North West Shelf with production starting in late 2023. Next, Santos is expected to sanction the Barossa gas project late in second quarter, despite its new carbon targets and the gas’ high CO2 content.”

Woodside is likely to sanction the Scarborough to Pluto project without contracting any additional LNG, taking on exposure to the spot LNG price.

WoodMac also expects AIE to sanction the Port Kembla import terminal to supply the east coast market, with formal FID expected in the first quarter of 2021. The facility will operate on a toll basis with gas buyers reserving capacity.

The report also highlights that it expects one LNG or infrastructure asset to change hands, with many assets remaining on the market as the bid-ask spread cannot be closed and buyers struggle to move past the abandonment liabilities and complicated joint ventures.

In addition, WoodMac is confident that small caps could take centre stage in 2021, with Strike Energy authorising the first phase of the West Erregulla project supplying the Western Australian domestic market, and Galilee Energy, Central Petroleum and Comet Ridge also pursuing FIDs on coal seam gas projects in Queensland.

“If there is anything set for 2021, it is the energy transition story and how Australia will play a leading role. Central to this will be revision of plans for new and existing developments. Electrification, carbon capture and storage (CCS) and batteries will be the preferred options to reduce carbon emissions,” Toleman said.

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